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      Question

      Which of the following ratio is useful in evaluating

      credit and collection policies?
      A Average payment period Correct Answer Incorrect Answer
      B Current ratio Correct Answer Incorrect Answer
      C Average collection period Correct Answer Incorrect Answer
      D Inventory turnover ratio Correct Answer Incorrect Answer
      E Quick ratio Correct Answer Incorrect Answer

      Solution

      The average collection period is used as an accounting measure to symbolize the avg. No. of days among a credit score sale date and the date whilst the customer remits payment. An entity’s average collection period indicates the effectiveness of its Accounts Receivable (or Trade Receivables) Management.

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